Between COP28 and New Year, this one may have been not on your radar but is going to be pretty important for water use disclosure requirements for the mining sector and its stakeholders: The European Commission on December 22 2023 published the regulation 2023/2772 on Sustainability Reporting Standards.
There is a lot of detail to go through, but some important initial comments:
Water is mentioned 340 times!! As the new standard indicates: “The topic of water and marine resources is closely connected to other environmental sub- topics such as climate change, pollution , biodiversity and circular economy"
Double materiality disclosure requirements. Where traditionally water use reporting has been based on impact materiality, the required financial materiality disclosure requirement adds a new component. This is a huge change as it involves water-related financial risk assessment. In the case of the mining industry this may relate to quantified drought and flood related production risk.
Some other disclosure requirements:
Indicate whether and how company policies address the following matters where material: Water Management, Product and Service Design in view of water-related issues, 3. Commitment to reduce water consumption in areas at water risk in its own operations and along the upstream and downstream value chain (This is effectively the Scope 2 and 3 of water analysis)
Metrics and Targets:
• Disclose targets, with tracking requirements. Also clarify how the targets relate to impacts, risks and opportunities.
• Water consumption, recycling and reuse metrics
• Total water stored and changes in storage. This is a main and partially new indicator for the mining sector. Changes in storage is covered by ICMM/WAF, but not by GRI/SASB/IFRS. Total water stored is brand new and especially complex for operations with tailings and/or heap leach infrastructure.
• Total water consumption in its own operations in m3 per million EUR net revenue
• Anticipated financial effects from material water and marine resources-related risks and opportunities
Also interesting to note are the terms definitions in Table 2 that have slight modifications on the description of water consumption, water scarcity, wastewater and water (recycled and reused) compared to other reporting standards.
As I see it, ESRS compliant sustainability reporting is going to take some serious work, and an absolute challenge for those companies required to report. In case of the mining sector, majors will have to start reporting in 2025 covering financial year 2024. Please refer to the timetable the EU published in https://lnkd.in/dRgErKxY
Full text of the standard: